Global Business: Pros and Cons of EEC, Reasons and Challenges of MNCs Internationalization, and Gymshark Case Study

This report discusses the pros and cons of EEC, reasons why MNCs internationalize, and challenges they face. It also includes a case study of Gymshark, covering domestic market analysis, strategies to internationalize, mode of entry, leadership qualities, and conclusion.

Global Business

Table of Contents
INTRODUCTION...........................................................................................................................1
INDIVIDUAL NOTES 1.................................................................................................................1
What are the pros and cons of the EEC.......................................................................................1
INDIVIDUAL NOTES 2 ...............................................................................................................2
Critically discuss the reasons why MNCs internationalise and the typical challenges they
encounter. ...................................................................................................................................2
INDIVIDUAL REPORT.................................................................................................................6
Introduction.................................................................................................................................6
Analysis of domestic market.......................................................................................................7
Strategy to internationalise..........................................................................................................7
Mode of entry challenges it may find in the country and possible solutions..............................8
Leadership qualities that supports the market entry....................................................................9
Conclusion...................................................................................................................................9
INDIVIDUAL REFLECTIVE ESSAY.........................................................................................10
CONCLUSION..............................................................................................................................13
References:.....................................................................................................................................15

INTRODUCTION
Global Business is also known as international business which is defined as the
production and sales of goods and services among different countries. In simple words, global
business refers to the company or organisation which perform business operations in several
countries around the world. Global business is related to the high level of competition among the
businesses. Major advantage of expansion of a business organisation is on the far side of borders
comes down to numbers. Performing business operations globally means accessing more
customers which helps in generating higher revenue and profit (Ronit, K., 2018). This report
include the advantages and disadvantages of European Economic Community, reasons of
internationalization of MNCs along with the challenges they encounter. A detailed analyses of
Gymshark is also included in this report which covers the analysis of domestic market, strategies
to internationalise, mode of entry with challenges, several leadership qualities which will support
the organisation in entering in a market. In addition to this, it also deals with an individual
reflective essay which state the learning from the module.
INDIVIDUAL NOTES 1
What are the pros and cons of the EEC
The European Community was consider as an economic association which have been
developed by six European members nations in 1957. There are three economic associations are
involved in The European Community which include The European Economic Community
(EEC), The European Coal and Steel Community (ECSC) and The European Atomic Energy
Community. EEC is also known as common market which was discovered by Treaty Rome in
1957 in order to reduce the stress which leads to war (Williams, S., 2018). The members of
community also focuses on the development of such strategies which can remove the trade
barriers. Below mentioned are the advantages and disadvantages of EEC:
Advantages
 Freedom of movement: The citizens of all state members have freedom of moving
from one member country to another. Citizens are free to study, work and travel in
any state of EU.
 Better jobs and workers protection: All the citizens of state members have
opportunity to work in any local area of any country of EU which state higher
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availability of opportunities of jobs for them. Due to the less operating cost in EU
countries, international manufacturer are moving their businesses. EEC is also
playing an important role in developing the working time directive which also
provide protection to the rights of employed workers in the EU members countries.
Disadvantages
 High cost of membership: It has been found that becoming a part of European
Economic Community is an expensive process. Cost per head lies between £300 to
£873 which also explain the reasons of spending of UK government reaches at a net
worth of £6.883 billion which do not include the cost of regulation (Advantages and
disadvantages of EEC, 2022).
 Problems with the policies: Several of disagreements may arise while operating in
different markets as a single market. EEC state that the common policies are being
adopted by the businesses while performing business operations which result in
several issues. It has been also found that the rules and regulations which were
developed for the purpose of protecting the small member countries also effect the
large countries as well. European Community always look for the interest of entire EU
not for the interest of any single or individual country (Baur, Rydelski and Zatschler
2018).
INDIVIDUAL NOTES 2
Critically discuss the reasons why MNCs internationalise and the typical challenges they
encounter.
Reasons of internationalization
A multinational company is defined as an enterprise which perform their business
operations in more than one country. Some of examples of MNCs include Marks and Spenser,
Tesco, Hilton and many more. Internationalization or internation business expansion is defined
as the procedure of expanding a business from domestic market into international market around
the world (Panibratov and Klishevich 2020). Several of reasons have been identified for the
expansions of business organisation in international market. Below mentioned are the some
reasons of internationalization of MNCs:
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 Increase in the sales and profitability: Expansion of business organisation globally
directly result in the improvement and increase in the sales of products and services
which help the business organisation in reducing operational cost along with generating
higher revenue. By the use of internet and advance technology, the international business
can introduce more attractiveness in the business. In addition to this, the business
organisation also have the opportunity of reducing the cost along with improving the
business management and operational efficiency. Greater Economies of Scale: Several of business organisation work for the expansion of
the products offered by the business because of higher demand of that products in the
global market. Expansion of business organisation by internationalization leads to the
several advantages to organisation through attaining the best economies of scale.
Majorly, it is consider as the case for the business organisations which are performing
business operations in smaller more domestic market (Vahlne, J.E., 2020). Hence,
internationalization also work as an opportunity in order to exploiting a new brand,
product or any service. Enter new market and spread the risk: The popularity of internationalization also result
in the opening up of barriers which comes in the path of trade along with reducing the
tariffs around the globe. Internationalization also give permission to the business
organisations in diversifying the businesses along with removing the risk of decrement in
in demand in various countries. When a business organisation perform operations
globally, it get the opportunity in investing in innovation along with the development of
several new variations of a particular product or service. Attracting new talent: Performing business operations in international market allows the
business organisation to access to a wider pool of talent. An effective and strong
relationship can be established among the organisation and customers, if the employees
can talk in multiple languages and are used to various cultures. A strong customer
relationship is essential for a business organisation as it help in generating higher
revenue along with developing positive reputation of business in the market (Podsakoff
and Podsakoff 2019). In addition to this, internationalization also permits the firms in
creating the global work teams as such employees can help the business organisation in
exploiting the local resources which can be used by them in experting in local market. In
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simple words, it can be said that the business organisation can get the access to the
greater pool of talent. Recruitment of international talent result in the introduction of
new skills related to language along with different educational benefit. It is helpful for
the management as the organisation can present themselves in front of customers in an
expertise manner. Saturation of Home market and competitors move: In order to remove the local rivalry,
the business organisations are required to expand their business operations globally.
Through the internationalization, the business organisations also gain the advantage of
first mover which also result in the exceptional high return on capital investment. The
first mover advantage is defined as the process of getting into a market and attaining all
the advantages or benefits of being first. It helps the business organisation in instantly
attaining the good market share in the new market (Alayo and et. al., 2019). Business
organisations are forced to go in the international market sue to the small domestic
market potential. At this stage, the organisation have option to use the international
market in order to extending the life of products along with the entire organisation.
Expansion of companies allows the access of new customers before any competitors. Governmental Reasons: It has been also found that the government of nation also
provide several incentives to the local or domestic companies to expand their business
operations in a new market. For instance, the government helps the organisations in
increasing the exports by providing them help related to finance. Decrement in the
barriers of trade is the major reason of internationalization which provide opportunities
to the local company to go abroad. The government of United Kingdom provide helps
related to the wealth to the companies when they decide to start exporting.
 Improve the reputation of company: Another reason of expansion of business
organisation in international market is to offer the best services to their international
clients. Positive reputation of organisation in different countries will attract the new
customers (Tung and Stahl 2018). Expansion of local business organisation in various
countries helps them in building the brand image along with establishing the credibility
internationally.
Challenges which are encountered by the MNCs in internationalization
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Multinational companies have a several reasons to expand their business operations in
several nations. On the other hand the companies have to face several of challenges as well while
internationalization. As the domestic market is going to convert in the international market, the
business organisation face many challenges which are given below: Market Imperfections: It may be very difficult for the companies to do the business in a
different country where it does not know about the laws of country, local customers or
business activities of the particular country, then the business firm is going to face few
challenges which made directly effect the capabilities of manager for forecasting the
business situations. Companies are also required to pay the extra costs for entering in the
foreign market which leads to the decrements in the interest of local companies.
Reduction in the earning of profits have been also analyses because of the isolation for
competition by transportation cost and other tariff and non tariff barriers which restrict
the organisation to competition (Arregle and et. al., 2018). Merger and acquisition is the
best to be for the business organisation to maximizing their joint income. Also this will
result in reducing the competition in the shared market as well. It is also beneficial in the
case when there are limited substitute or license is in foreign market. Tax Competition: Sometimes, it has been founded at the sub National regions and the
countries complete against each other while establishing MNC facilities, economic
activity, employment and subsequent tax revenue. It is necessary to compete the regional
political districts and countries to give incentives to the multinational companies which
include pledges of governmental assistance, tax breaks or improved infrastructure. In the
case of failure of such incentives, the company is have to face the challenges which
reduce the chances of becoming more attractive to the foreign investment. Sometimes it
has been also analyses that the multinational companies are busy in a race to the top.
Multinational companies can also take the comparative advantage because of two
important factors which include low tax burden or less labor cost (Bommakanti and et.
al., 2018). It also do not include any evidence for the suggestion to MNC deliberately
avail them of tax environmental rules and regulations and poor labor standards as well. Political Instability: It has been found that several of multinational companies face the
problem of issues related to the instability in politics while starting the business
operations in international market. Majorly, these issues have been raised because of lack
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of reliability of government authority. In such situations, increase in costs of business
along with the increase in risks have been identified which also result in the decrease in
the skills and abilities of managers related to the forecasting the market trends. In
addition to this, the discouragement of foreign investment is the only result of corruption
and weak legal frameworks which have been developed by political instability. Market Withdrawal: The sizing of MNCs implies an vital impact on the policies formed
by government, majorly by the threat of market withdrawal. For instance, in order to
focusing on the reduction of health care cost , some of nations are majorly focusing on
the pharmaceutical organisations for licensing the proprietary drugs to the competitors
organisations working locally by charging a small fee. In the situation of such threat, the
multinational companies are require to withdraw from the respective market. It has been
found that all the countries which are facing such type of dissension with MNCs are the
most successful and large countries which include Brazil and United States. These
countries have executable aboriginal competitors in the market (Roberts and
Muralidharan 2020).
 Lobbying: Companies performing operations in several countries, lobbying is oriented at
a scope of business interest, from tariff structures to rules related to environment. Those
business organisations who have invested a lot in adopting the machines and techniques
to reduce the pollution may lobby for highly tough standards of environment as an
effective element of forcing non manageable competitors towards the weaker section.
Companies lobby tariffs is essential to control the competition of foreign industries.
INDIVIDUAL REPORT
Introduction
Internationalization is the procedure under which the local company start their business
operations in the international market or any other country. It is a method of expansion of
business in the international market. It is necessary for the business organisation to analyse the
market before expanding the business operations as it has been identified that the change in
business environment can effect the business operations negatively (Schepis, D., 2020). The
chosen organisation for this report is Gymshark which is a brand of British fitness apparel and
accessories and manufacturer having headquarter in Solihull, England. This report include the
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domestic market analysis, strategies to internationalize, mode of entry in Vatican city along with
challenges. Along with this, it also involve the leadership qualities supporting the market entry.
Analysis of domestic market
Analysis of market of Gymshark can be done by applying marketing mix which include
4P's of marketing i.e. product, price, place and promotion. These P's help the business
organisation in making the decisions related to the products, prices, place and promotion. Below
mentioned is the detailed analysis of market of Gymshark: Product: Gymshark is offering fitness garments and accessories for both categories men
as well as women which include hoodies, leggings, vests and many more. The product
portfolio of of Gymshark involve comfortable gym wear. The management of
Gymshark always goes through the trends and provide trendy clothes to their customers. Price: It has been found that the Gymshark is providing their products at an affordable
prices to the customers of England. Majorly, the organisation has keep the prices
between £8 and £105 (Market analyses of Gymshark, 2022). this approach attract the
target customers of organisation i.e. young age people. This pricing strategy of
organisation also help them in beating the competition. In addition to this, it has been
also found that the fabric provided by this organisation is not best as per industry but it
is good for regular use. Place: Gymshark is offering gym wear clothes and accessories to the customer of
England through pop-up stores. Along with this, the company is also providing products
through online website and application (Ooi and Richardson 2019).
 Promotion: Gymshark is majorly using several social media platforms which include
Instagram, Facebook and Twitter. This organisation has also paired with some
YouTubers for promotion such as Lex Griffin and Nikki Blackketter.
Strategy to internationalise
Internationalization is the process of expanding the business operations in a new country.
There are several strategies which are available for internationalization which the organisations
can adopt at the time of internationalization. It is necessary for company to select any precise
strategy when the organisation is planning to internationalize (Kryscynski and et. al., 2018).
Gymshark is also require to select any of given strategy of internationalize while expanding their
business in Vatican City:
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 Choose the export: It is consider as the majorly adopted strategy to internationalize under
which the export of goods have been done. The business organisation can directly
perform the function of direct export or it can involve intermediators who perform the
function of distribution of products offered by company in the abroad market. Several of
organisation chose this strategy as it do not require any outlet in the market which require
huge amount of investment. OPT for foreign direct investment (FDI): Second strategy of internationalize is to do the
direct investment in sharing or complete acquisition in a company which is already
operating in the foreign market. This strategy involve high costing but it reduce the risk
of entering in the new market of new country. The implementation risk get decrease by
investing in the already operating company in abroad market (Schlegelmilch and Szöcs
2020). It leads to the development of skills and knowledge of the existing business along
with opening a new branch. Another type of direct investment is to open an association or
subsidiary abroad. The establishment of new firm in order to performing the commercial
activities in foreign country indeed presents the more essential investment rather than the
acquisition of an existing branch.
 Adopt a licensing strategy: Licensing is defined as an agreement through which licensee
get permission to use the copyrighted resources for a particular time duration in the
exchange of royalty fees. Under this strategy of internationalize, an enterprise can take
the advantage of the image of well established company working in the foreign country
and introduce a partner in the new market. On the other hand, this strategy also have a
huge disadvantage which state that the foreign company is not the part of parent
company. It state that the licensee can also become the competitor of parent company
after expiry of agreement of licence.
Mode of entry challenges it may find in the country and possible solutions
While exporting the products to the Vatican City, Gymshark can face several issues
which include legal regulatory and intellectual property issues, language and cultural barriers,
logistics and many more. Gymshark is required to do the complete study of laws and legal
regulations of Vatican City and after that perform the function of exporting. Gymshark is also
require to hire an interpreter, who can give training to the staff members top overcome from the
language and cultural barriers. Management also have to pay the customs and duties before
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transportation. They can use Incoterms (International Commercial Terms) which is a system of
contrast language which plays an important role in avoiding confusion (Solomon and et. al.,
2019).
In the entry mode of franchising and licensing, Gymshark can face several challenges
which include higher operating cost, less brad control, less decision making power and many
more. Gymshark can work to justify the store opening cost by local shopping contractors and
renovators of England and see who can provide the best price which leads to the bring down the
opening cost of store (Critchley and Wyburd 2021). Gymshark is also require to hold themselves
to the most highest possible standard of offering products, it can avoid the problem of less brand
control.
Leadership qualities that supports the market entry
Below mentioned are the several qualities of leaders of Gymshark which plays an important role
in supporting the market entry in Vatican City: Effective communication: The leaders of organisation are require to explain their ideas
and the vision of organisation to the employees. While entering in the new market, the
organisation is required to give more efforts to achieve success and communication
among leaders and employees develop an effective team in the organisation (Esempio,
A., 2021).
 Industry Expertise: The leaders of Gymshark is also required to lead the work place and
the entire respective field or industry as well. Leaders have to apply their expertise in
making effective and important decisions while entering in the new market.
Conclusion
From the above report, it has been concluded that the internationalization is the process
which plays an important role in increasing the revenue generation and profitability of
organisation. There are several strategies have been also identified which the organisation is
required to chose while planning for internationalization. There are various modes of entry in
new market which also have their own challenges and the organisation have to face all the
challenges in an effective and efficient manner. Leaders and managers of organisation are also
plays an important role in the internationalization process as it direct the employees and
organisation as well.
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INDIVIDUAL REFLECTIVE ESSAY
Strengths Weaknesses Time management skills: I am
performing very well in completing all
the assigned task in an effective and
efficient manner as per the given time
period. I submit all my work before its
deadline. Resolution directed: I have skills of
discussing the issues and problems with
my team members. So that I can find
the best solution to the issue and
problem facing by employees in the
business organisation.
 Administration management skills: I
realize that I can not properly use my
abilities in order to manage all the tasks
in the process of expansion of business.
 Information Technology: Adoption of
new and advance technology because
of less knowledge of IT skills.
Opportunities Threats Listening skills: It is essential for me to
develop the effective listening skills
which help me in listening the views
and suggestions of my employees in
order to finding the effective solutions
to the problems faced by employees of
organisation. Understanding HRM: I can also
improve my leadership skills by
understanding the personnel of
employees which leads to the
performance of job role in an effective
and efficient way.
 Regular changes in trend: Constant
change in trend is consider as the threat
for me. I have to do research of on the
current market trends for the purpose of
overcoming from the situation of
changing needs and requirements of
people.
 Competition: The availability of people
with higher skills and experience is
high which result in high competition
in the professional life.
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Skill/ behaviour/ Poor Average Good Excellent
Understanding
HRM
*
Time
management
*
Listening skill *
Information
technology
*
Administration
management skill
*
Resolution
directed
*
CONCLUSION
It has been concluded from the above report, that the global business plays an important
role in the development of overall economic condition of country and people as well.
Internationalization leads to the development of organisation as it allow them to earn huge
amount of profit. European Economic Community state various policies which make the process
of internationalization more easy and effective. This report also describing the reasons of
internationalization along with the challenges faced by the companies. Gymshark company is
expanding their business in Vatican City. Hence, the organisation is required to do complete
analysis of market and the leaders are required to have specific skills for performing
internationalization.
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References:
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MNCs from post-socialist emerging markets. Multinational Business Review.
Podsakoff, P.M. and Podsakoff, N.P., 2019. Experimental designs in management and leadership
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Ronit, K., 2018. Global business associations. Routledge.
Schepis, D., 2020. How innovation intermediaries support start-up internationalization: a
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Schlegelmilch, B.B. and Szöcs, I., 2020. Rethinking business responsibility in a global
context. Cham: Springer.
Solomon and et. al., 2019. Marketing: Real people, real decisions. Pearson UK.
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What we know, what we don’t know, and where we are headed. Journal of
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internationalization to evolution. Global Strategy Journal, 10(2), pp.239-250.
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Online
Advantages and disadvantages of EEC, 2022 [online] Available through
<https://greengarageblog.org/9-foremost-advantages-and-disadvantages-of-the-
european-union>
Market analyses of Gymshark, 2022 [online] Available Through <https://digiaide.com/gymshark-
marketing-mix/>
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